business essay

Analysing Management Knowledge and Information Systems

Published: 23, March 2015

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New information systems have bought enormous positive impacts in today's organisations. This paper includes a wide range of information systems (ERP, CRM, BPM, and MIS) being used in modern business industry. It purposes to present various information systems and produce a critical analysis of systems to identify the means, to examine the ends, and to investigate the ways how these can be achieved within an organisation. While some information systems were implemented successfully, others were unsuccessful due to some reasons for example, resistance of users, or insufficient knowledge on implementation of particular systems. In order to support clear explanation, the Korean Air which is global airline company, was used to evaluate their current information systems and how these have been operated and managed. Also, several recommendations were added to improve weaknesses or potential limitations, and potential future improvement of the identified systems. Each system has potential issues such cost expensiveness on implementation of ERP, or integration difficulty. Moreover, this paper has strongly been designed by critical arguments to support understanding of course objective.

Table of Contents

Introduction

Company background: "Korean Air"

Means-Ways-Ends

Means: "SKYPASS"

Ways: Critical analysis of information systems

Ends

Conclusion & Recommendation

Reference list

6.0 Appendix

1.0 Introduction

"Luck is the result of good planning, good planning is the result of good information well applied" (O'Brien, 1970:1)

Knowledge, skill, information, and figures are all the substances how organisation decisions are made of (O'Brien, 1970). However these days, because of a large volume of information that might be overflowing, effective managing information is a big challenge in every organisation. To be honest, information is the key source forming the management sphere, playing an important role in the relation between means and ends (Parker & Case, 1993). But the issue in today's business industry is handling lots of information to differentiate from raw information. When it turns into useful data, it helps to assemble into the power of knowledge. Hence, information is not only important to the meaning of itself, but also important to a way of handling efficiently. For successfully handling information, effective information technologies are required to develop in supply chain management.

As we can see from lots of reading article these days, we can realise that information technologies continue to evolve and allow the way to produce better operational performance within organisation. For the purpose of strategic objectives of the system, some sorts of technology have been adopted to widely improve the relationship between in supply chain. In today's organisations, a large number of technologies or systems have been introduced in their operation and continue to increase efficiency in many purposes. In this paper, I would like to analyse of an information system with my choice of global organisation and will identify means, ends, and ways by providing critical evaluation based on information system.

2.0 Company background: "Korean Air"

Korean Air is one of the world's largest international airline companies which deals with more than 100 different cities in the world. As it is a global company, Korean Air deals with many different areas in several industries such as aerospace, catering, hotel, Limousine, and in-flight sales (www.koreanair.com, n.d.). Basically, Korean Air is the national airline company where global headquarter of the company is placed in Seoul, South Korea. Especially Korean Air offers a loyalty program for frequent passengers, which is named "SKYPASS" (www.koreanair.com, n.d.). It is a loyalty programme that enables members to fly with accumulated mileages.

3.0 Means-Ways-Ends

3.1 Means: "SKYPASS"

"SKYPASS" provides bonus mileages for free travel and free upgrades on Korean Air. It is a loyalty system for frequent flyers to provide many benefits. This loyalty programme motivates customers to gain mileages because a membership card is multi-functional; members of "SKYPASS" can use this loyalty card like a credit card with their accumulated mileages. The Korean Air deals with a wide range of business partners such as credit card companies, fuel companies, or public banks (Pandit, 2009). Therefore, members can buy any goods or services with their mileages and it also enables members to gain mileages when they purchase something from their partners because Korean Air sells mileages to their partners. "SKYPASS" assists to collect data from various customers and can be flexible sharing data within an organisation because it records every transaction to provide better quality of customer relationship. Furthermore, it integrates the systems of ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), YMS (Yield Management System), and CRS (Computer Reservation System) within an organisation. There are four systems that have implemented in Korean Air; ERP, CRM, YMS, and CRS.

ERP (Enterprise Resource Planning)

ERP is a way to integrate the database which collects data of an organisation into a single software. It is an integrated software solution that helps to manage business resources. This provides durable information that it will be available for further business processes. Therefore, it includes many different resources and components in order to complete integration. Today's ERP system can be implemented in a wide range of business processes. It can be used for managing Supply Chain Management, Customer Relationship Management, and Sales and Production, Finance and Accounting, and Manufacturing and Human Resources Management. Therefore it is a flexible system that will be available for every division or department providing required information within an organisation. However, failure of ERP systems can also be found in some organisation in today's business with insufficient understanding of implementation or a lack of technical support.

CRM (Customer Relationship Management)

CRM is a business philosophy, supporting a business strategy which focuses on the customer in the middle of an organisation's development. On this account, CRM is the central process to manage the customer relationship efficiently. It emerged in the last few decades to play an important role of the customer to maintain the strategic positioning of a company (Payne & Frow, 2005). It aims for understanding the customers and for developing this relationship to design operational activities, to support efficient production, and to gain the control over the supply chain. Furthermore, CRM is a widely used within an organisation, for example, it assists to collect customer data for managing contact management, identifying customer segmentation, and customer retention to increase profitability.

YMS (Yield Management System)

Yield management is fundamental system which can be used in service industry, including an airline company. It has used in many service industries to allocate limited resources, such as airplane seats (Netessine & Shumsky, 2002). YMS is one of the business strategies in order to maximise the sales revenue, therefore YMS is known as the revenue management in the meantime. However, as the airline industry provides perishable products and service which cannot store, there are some challenges that should be considered. YMS enables an organisation not only to improve their sales revenue, but also to maximise the capacity in order to fluctuate customer demands, therefore many organisation in today's business implement YMS as the key solution in their technological systems.

CRS (Computer Reservation system)

CRS is a computer reservation system which enables an organisation to manage all the reservation in order to increase other business sectors. It motivates customers to adjust their flight schedules or other available services such as accommodations, rental cars, railways, or leisure activities. It provides a flexible network showing the booking status, therefore, it helps to plan effective travel schedules. Most airline companies use CRS to close the physical distance between a company and customer individually, therefore, it also brings a convenience to communicate between a company and customers in order to achieve sales activity.

3.2 Ways: Critical analysis of information systems

There are a lot of technological systems existing in many organisations. Particularly, many changes have occurred in the general atmosphere of the organisation, Korean Air. As the description above, Korean Air is a global company which deals with many retailers and a large volume of customers every day. Therefore, understanding practical systems and implementing better technology are always required to control within the company. Korean air has been measured to launch a new technological innovation on the basis of system management since the early 2000s (www.microsoft.com, 2010). With this reason, ERP was implemented in organisation which is based on software technology. Basically, ERP is an integrated bundle of programmes which offers data for making decisions (Aladwani, 2001). One of the biggest characteristics of ERP is managing the control of all the processes for the purpose of sales, production, manufacturing, inventory, accounting, marketing and human resources. Generally it supports all the different parts of the organisation by sharing data, providing knowledge, reducing costs, and improving management of business processes (Aladwani, 2001).

While ERP provides many benefits, Aladwani (2001) asserts that ERP systems will also be unsuccessful in some cases (as cited by Stratman and Roth, 1999). A quiet large number of ERP engaged difficulty of implementing ERP with particular reasons. When adopting new system into organisation, top management frequently confronts an unnecessary approach from probable users. In the case of airline industry, it is extremely hard to figure out that the system of airline industry was mainly built by ERP technology, because the airline industry distributes over many different parts of divisions in organisation. Particularly, Korean Air deals with many different fields of industries including hotels, aerospace, and air cargo industry. It is not simply about airline industry. Therefore, the system which was built by ERP should be customised by considering correct implementation of ERP. Nevertheless, ERP customisation is sometimes a significant concern for organisation to implement ERP system. (Davis, 2005). A well-supported claim can be considered in this case; ERP has been failed for many years and it is very common these days (Luo & Strong, 2004). Therefore, ERP system can often be huge complex system to be considered. For making decision whether customisation of ERP is required or not, it is also complex issue due to several reasons. As mentioned earlier, Korean Air is a global organisation that deals with more than 100 different cities in 39 worldwide nations with many employees in various divisions. Thus, there will be a difficulty using ERP to fit the system into organisation which will be caused by workers' resistance. ERP system is considerably well-packaged software rather than customised system (Luo & Strong, 2004).

In Korean Air, there are numerous divisions existing within an organisation. With an implementation of ERP, user resistance will be incurred. According to Aladwani (2001), he emphasizes that there are two primary causes of resistance to new system; perceived risk and habit. Because of these issues, the organisation must have utilised the suitable bundle of strategies to identify potential problems.

However, there are also many positive cases with implementation of ERP. After having faced the most challenging time with implementation of ERP, there are several advantages that have been shown in the processes of Business-to-Customer (B2C), Business-to-Business (B2B), and Business-to-Employee (B2E). The airline industry commercially deals with those business partnerships and implementing ERP can be the key solution to manage the total control of business value chain for airline industry (www.mahindrasatyam.net, n.d.). Due to the fact that ERP is not simply a technology, it is an infrastructure of organisation that upholds all sort of information and it allows a firm to employ the collective information. Furthermore, the Korean Air uses ERP to collect all the data from customers, supply chain retails, and employees. As stated earlier, the Korean Air offers a loyalty programme frequent flyer programme called "SKYPASS" that integrates the systems of ERP, CRM, YMS, and CRS (Bendoly & Schoenherr, 2005). Because of this loyalty programme, there is a transformation from frequent flyers who might be members of "SKYPASS" to frequent buyers. "SKYPASS" is multi-functional; members can use membership cards like a credit card with their mileages. Also, it also enables members to gain mileages when they purchase something from their partners, because Korean Air sells mileages to their partners. Moreover, "SKYPASS" also assists to collect data from various customers and can be flexible sharing data within an organisation. As a consequence, the majority of airline frequent flyer mileages are now obtained outside (Pandit, 2009).

As an airline industry seems hard to expand market share and continue to retain profitability in today's intensely competitive, they should attempt to consider new ways to control their customer relationships to make the best use of customer loyalty and profits. As long as airline industry deals with many customers, CRM (Customer relationship management) is essential to play an important role for the strategic positioning of a company (Payne & Frow, 2005.). CRM reflects overall view across customers.

One of main airline's concerns is to minimise unnecessary cost in order to deliver better business operations. In the case of Korean Air, they concern much on the customer relationship through approaching CRM in a few ways. The Korean air has standardised and transmitted data to online CRM for increased potential improvement and total control because they manage more than 10,000 travel agencies through submitting online data to maintain in relationship with customers. When a Korean Air salesman resigned from the company, all the information and customer records occasionally went with him. In airline industry, customer details should be considered as viral resources. Therefore, they ultimately decided to establish online CRM system in order to achieve better sales performance. The data should be standardised and centralised in order to provide up-to-date information (Tran, 2006).

CRM requires proper customer understanding as it is fundamental requirement in the process of CRM system because it leads to enhanced customer lifetime value. If it is a failure to achieve, there will be unsafe issues that will incur. Likewise, insufficient focusing on customers will be resulted in reduction of customer lifetime value. The Korean Air provides tolerable customer service keeping excellent in relationship with customers. For example, Korean Air is associated with the world airline review website, therefore, the customers can take any feedbacks or comments after flight (www.airlinequality.com, n.d.). These collective feedbacks or comments will be reported to the customer support division and they will analyse all the data and improve managing system of CRM in organisation. The loyalty programme, "SKYPASS" is a membership programme, however it is flexible to measure the service quality. Members of this programme can feely take any feedback on Korea. If the service is reasonably unsatisfactory, they will upgrade this member's seat for next trip through collecting data from "SKYPASS". This is a fine example of use "SKYPASS" to improve CRM with customer's experience. However, it only allows within the membership, unidentified passenger, non-member of the loyalty programme will be ignored easily.

In the airline industry, YMS (Yield Management System) is fundamental business strategy to increase the sales revenue and maximise the capacity of the business process. It is known as the revenue management and has been used in a wide range of service industry for selling perishable service or products. It helps to manage the sales in variable conditions, for example, cancellation or a lack of booking status. Also, Korean Air uses this system to maximise the capacity in order to increase their sales revenue. It is advantageous for members of loyalty programme, because "SKYPASS" identifies the overall data though collective information and inform members of "SKYPASS" with lower price like a special offer. YMS purposes to gain inventory control because seats and onboard services on flight are the perishability which cannot store for next time, it will generate no revenue. Moreover, YMS helps to increase the revenue by fluctuating demands because it allows an organisation to sell the tick in advance (Voneche, 2000). If all the flight tickets were sold at once, the sales revenue will be a fixed and will not obtain any advantage from customer behaviour. This is how all the airline companies maximise their profit. The "SKYPASS" enables an organisation to shape a customer demand pattern, reservation, cancellation, and other figures with frequent data from customers. However, sometime it faces several challenges in order to deal with customers; overbooking, discount allocation (Subramanian, Stidham & Lautenbacher, 1999).

In order to maximise the sales revenue, the airline company sells more units than their capacity (Koeningsberg, Muller & Vilcassim, 2004). This is overbooking and can be very costly. Therefore, poor performance of reservation management leads to unprofitability within an organisation. Taking excessive yield management incurs operational losses, it is a disadvantage of using YMS. While YMS is flexible to maximise the sales revenue, it should be considered to use for better timing, for example, it should not be used in high peak season. The operation manager must know whether YMS is required or not, depending on time variation. Before making a decision to use YMS, an operation manager should monitor the booking status on the CRS because it provides all the reservation data through "SKYPASS" which enables an organisation to take further action with regard to the booking condition. At this point, YMS is too dependent upon how promptly organisation decides to implement YMS in the control of customer demand. YMS is sometimes competitive, however, it is also disadvantageous because of an inappropriate timing, or a lack of understanding of systematic knowledge. Therefore, insufficient YMS is no longer competitive for long term achievement in a variable business environment.

As CRS assists to analyse collected data from travel agencies, it will be extremely useful for B2B and B2C, because CRS stores the most recent information about all available services for customer demands. It is a fundamental infrastructure to communicate with customers regarding the reservation and other additional requests, concerned with service allocation. Korean Air usually deals with this system and shares the information with members of "SKYPASS" because it motivates customers to buy additional services and increases the other sales sectors, such as hotels, or rental cars. Furthermore, CRS enables a customer to adjust the flight schedule individually, therefore, it helps to achieve customer satisfaction. In addition, if CRS shows a lack of booking, airline industry provides special offer with lower prices for both a travel agency and individuals, members of "SKYPASS". The CRS brings much better competitive advantage and fulfils customer expectation. However, nowadays, CRS has been controversial due to some issues. CRS comes up with an argument about its function because it was not be able to fulfil market movement and customers' needs. Moreover, it took high distribution costs. But CRS is very flexible to use, more competitive advantages can be gained, if CRS has been used effectively.

3.3 Ends

The Korean Air provides better quality of customer relationship because ERP system in organisation collects customer feedbacks and analyses what sorts of problems they faced, what can be improved, or how to handle future prospect in operation. According to Ndede-Amadi and Mykytyn (1999) assert that ERP system does not only provide immediate benefits, but it also allows bringing potential benefits for maintaining future competitive advantages (as cited by Bendoly and Schoenherr, 2005). Also, CRM helps to develop the customer relationship. CRM is essential to play a significant role for the strategic positioning of a company (Payne & Frow, 2005). Due to the fact that CRM reflects overall view across customers, it brings the competitive advantage with loyalty system. The "SKYPASS" is a loyalty programme, which is flexible to measure the service quality. The members of this loyalty programme can feely take any feedback on Korean Air. If the service is reasonably unsatisfactory, they will upgrade this member's seat for next trip through collecting data from "SKYPASS". This is a fine example of use "SKYPASS" to meet customer expectation and it will deliver customer satisfaction. Therefore "SKYPASS" is the central process between an organisation and a customer to improve the relationship with further actions. It is a key solution to communicate each other to develop customer relationship and evaluate current position in the market. An effective system management improves business intelligence, better decision making, effective customer relations, and better quality of product and services.

As the future success of airline industry is dependent upon how promptly and accurately organisation reflects to changes in customer demand, more systematic development should be considered on the knowledge management that brings competitive advantages (Foon & Eurn, 2008). Since the last few decades, Korean Air frequently used YMS to maximise their operational profit and they believe YMS provides a sustainable competitive advantage over competitors therefore, airline industries strategically defined YMS as 'Innovative Pricing Strategies (Knorr & Zigova, 2004). However, poor performance of reservation management leads to unprofitability within an organisation. Therefore, YMS is sometimes competitive, however, it is also disadvantageous because of some factors; inappropriate timing and a lack of understanding of systematic knowledge. An insufficient YMS is no longer competitive for long term achievement in a variable business environment.

4.0 Conclusion & Recommendation

Nowadays, there is a tendency too dependent on information systems to achieve business objectives. Sometimes, human resources are more efficient to use in order to process strategic business plan. Managing information system purposes to communicate for free information flow. However, there is a difficulty to utilise information system, due to a lack of understanding of systematic knowledge. It is essential to know how basically the information system interacts with users. Therefore, several methods are given in order to increase efficiency within an organisation.

Regular Employee Training - Regular employee training is required to develop individual skill and ability towards adaptation of new information system and it increases the competition in current market place in order to meet customer demand. Furthermore, employee training also brings an effective communication to create productive work force within an organisation. Therefore, an organisation should motivate employees to participate training in order to increase employees' workability. For example, ERP was faced an issue by user resistance. To engage in this act, awards should be given to outstanding employees and it will motivate more employees.

Elimination Inefficient Information System - The top management should promptly eliminate an inefficient information system to prevent from potential risks. Because it will be costly a lot and impact negatively on financial performance. The operation manager should be able to identify unprofitable information system and understand how poor decisions would impact on their strategic performance. Therefore, it is really important to understand current market movement and customer behaviour in order to maintain market position.

Regular Inspection - To prevent from potential systematic errors, regular inspection or examination should be practised in order to improve system quality. Sometimes, fatal systematic error can be occurred due to a lack of management skill or knowledge. CRS is dealing with individual customers, therefore, the organisation should provide better quality system in order to meet customer demands. Also up-to-date information should be available by regular update.

As all of suggested ideas are provided, the organisation should recognise how important the information system is. The information technology should continue to be developed and evolved to maximise operational performance. In today's organisation, many technologies have been introduced however, there is a difficult to identify whether it is efficient or not. The Korean Air used several information systems and some of them were efficient, while there were few with poor performance. Through this paper, means, ends and ways were well identified and analysed by critical evaluations.

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